Saturday, March 14, 2009

There's a meme out there that seems to be picking up steam that Detroit represents not so much a unique dysfunction, but rather a harbinger of what is to come for America's cities. Detroit News columnist Daniel Howes said, "Back when Michigan's economy was merely troubled -- before $4-a-gallon gas and frozen credit markets pushed the auto industry into free-fall -- Gov. Jennifer Granholm warned the Big Mitten's deepening economic problems could presage what lay ahead for the nation. I and other skeptics chortled, figuring the collective denial of economic reality, anti-business rhetoric in Lansing, rote acceptance of labor's influence in policy-making, and higher tax loads on individuals and companies here couldn't possibly go national. The combination was too toxic, too self-defeating, too steeped in a last-century worldview that had been discredited by events and chronic failure. But I was wrong."

John Reed gets in on the theme in a long piece over at the FT titled "Rust Sleeps: Can We Glimpse an American Future in the Travails of Detroit?" Per Reed, "Instead, Michiganders, despite being self-deprecating to a fault, make a point their countrymen won't want to hear: Detroit is no longer the nation's worst-case scenario, but on its leading edge, the proverbial canary in the coal mine. 'It's like the rest of the country is getting to where Detroit has been,' said Peter De Lorenzo, who writes the acerbic and very funny Autoextremist.com blog. That means that smug mock-horror is no longer the appropriate reaction to the frozen corpse. Instead, get ready for a shock of recognition."

Speaking of the Autoextremist, who is required reading btw, he said last week, "Several years ago, I called Detroit and the declining U.S. auto industry 'the canary in the coal mine' for the rest of the nation. The lack of a national health care program, the nation’s growing uncompetitiveness in the face of a burgeoning global economy, the steady erosion of this country’s manufacturing base and so on were issues that were going to catch up to the rest of the country eventually."

With a deep recession ravaging much of the country and doing severe damage especially in the industrial heartland, this has a surface appeal. And no doubt this recession has accelerated the train wreck of any number of places like Detroit that already faced a strategically untenable position.

But I do not believe the rest of America is heading the direction of Detroit. Detroit's problems are unique, deep, and longstanding. It is tempting to say that Detroit's problems are of recent origin, or maybe date them back to the 70's oil shocks or the riots of 1968. But the reality is, Detroit's problem far pre-date those events. Consider this view of Detroit:

In The Economy of Cities, Jacobs cites the collapse of Detroit to a one industry town and the cessation of the development of new businesses resulting from a focus on large scale efficiency in manufacturing as a fatal flaw that doomed this once thriving city. She dates this to the 1920's. Again quoting, "Detroit had a high rate of development through most of its history and a very high rate indeed at the time the automobile industry was being developed there. But since 1920, Detroit has had an exceedingly low rate."

Ironically, in the same book Jacobs uses Detroit as an example of good urban development, showing its progression from flour mills, to copper processing, to steam ship engine manufacture. There was a plethora of industries that developed and flourished in Detroit. But when the auto industry started to consolidate, something when wrong and the system that had sustained Detroit's development stagnated.

Beyond that, Detroit seems to suffer, and to have long suffered, from dysfunctional leadership - not just governmental leadership, but leadership across the board. Reading about the financial travails of the Detroit Institute of the Arts, I was shocked to discover they had an endowment only 1/3 the size of the Indianapolis Museum of Art. Detroit is one of America's largest cities - it was in the top 5 in America for a long time I believe - and for long one of its most prosperous. The auto industry generated fantastic wealth in Detroit. Why did so little of it make it back into the cultural infrastructure of the city? This is but one example.

This has been going on so long that it is hard, honestly, to blame the leaders there today. They were born into a system that is so bad, it would take truly heroic leadership and change to move the ball. How does one effect racial healing, or a rapprochement between city and suburb? It seems like a daunting prospect for even the most well-intentioned.

I don't have the time to make an exhaustive study of the matter - though someone should - but it seems to me that Detroit is a fairly unique case. There are probably some other places that are suffering as much and will continue to suffer after the recession is over, but I don't think the rest of America is headed on the Road to Motown. Most of America lacks Detroit's long, institutionalized decline, stagnated one-industry economy, and terrible historic culture of leadership.

26 comments:

I'm not sure a genealogy of Detroit's decline will reveal the source of its current woes. The peak population of many Rust Belt cities was in the 1950s, when suburbanization got going. I know that Pittsburgh's withering industrial economy is a half-century in the making.

My guess is that Detroit's political muscle at the federal level kept buying the region time, pushing the inevitable shock further into the future. Detroit has also been a gateway city for many immigrants. Regardless, most economic indicators reveal Detroit to be an outlier, even among its Rust Belt cohort.

Earlier post this week “Could Marion County Implode?” discussed the Indy metro region facing a similar fate as Detroit. One suggestion to prevent this that caught my eye was recruitment and investment in people not buildings. Looking at the photo essay from TIME Magazine this week of the urban blight in Detroit that nearly rivals post-war Dresden or other bombed out European cities, it becomes apparent for nearly a century Detroit built factories, skyscrapers, and mansions, but potentially did not invest in a creative diverse class of citizens that could survive. Rather, from what I read, it appears the city was a machine to generate as much wealth for as long as it could. People were cogs and gears.

A proposal from “…Marion…Implode?” was something along the lines of city sponsored fellowships for intellectuals and artists. Universities in Indianapolis already have a steady stream of fellows, visiting professors, and post-doctoral researchers, as well as artists and other thinkers visiting the city each year. Maybe the mayor’s office should roll out the red carpet for these people. The idea would be to co-sponsor 40 to 50 of these positions for intellectuals and creative types between 25 and 35 or 40 years of age. These people would be actively encouraged to socialize in and experience Indianapolis (events, sports, dinners, attractions, etc.) It is tragic for extremely intelligent, interesting people visit and live in our city but experience little between their apartment (probably in the suburbs) and their place of work or study – it does happen to often. The hope would be to retain more once they have completed their programs. At the least word might out when they moved on that Indianapolis was “surprisingly” excellent – as I think it is. Additionally a “think-tank” could be created among these people to offer outsider opion to the mayor’s office, city-county council, convention bureau, etc. on issues. Any thoughts on ways to get more intellectual capital in the city?

Jim, you may be right. What I think is interesting about Detroit though, is that arguably its decline began much sooner than the post-war boom. I believe this is also true of Pittsburgh - which Jacobs has stagnating in terms of new development around about 1910.

The key is that once you stop creating new types of economic value - Jacobs would probably say stop creating import substitutes, though I'm not sure how I feel about that - you are done even if you technically keep growing for quite some time.

JG, a lot of good suggestions. I don't think Marion County will become Detroit. In fact, I put the implosion scenario at 25-33%, with the likely outcome being something more like Cincinnati in terms of regional growth. Nevertheless, that would not be a good outcome. You are right, people - and the social institutions that let them flourish - are the key ingredients in urban success.

One thing I would suggest is that it is great to get people to come, but it isn't a tragedy if they move on either. Talent is more mobile than ever today. It isn't reasonable to expect to hold anyone for the long term. Better to let people ping-pong in and out. They are probably picking up invaluable experiences while they are elsewhere, and, presuming they liked what they saw when then were in town, they are like a "field sales force" selling the good news about Indy or whatever your city might be.

The key is that once you stop creating new types of economic value - Jacobs would probably say stop creating import substitutes, though I'm not sure how I feel about that - you are done even if you technically keep growing for quite some time.

I buy locational advantage theory. The rise and fall of Buffalo illustrates this nicely. Once the transport network became irrelevant, Buffalo collapsed. But post-MLK riot urban America provides a baseline of economic development. I don't see a rationale for delving into city history before that point (say ... 1973).

One thing that might be telling is the out-migration rate. Did the Detroit region ever suffer from an acute exodus like Pittsburgh did? I've come to appreciate that Pittsburgh invested heavily in human capital during the 70s, which laid the groundwork for Escape the Burgh in 1982. Many cities such as Chicago and NYC underwent a major makeover and pulled out of the doldrums the hard way. But I don't know how Detroit did on that count.

Jim, there's probably something to locational advantage in certain cases like Buffalo. Particularly where those cities did little more beyond exploit that. These places were always shadow cities, no matter how prosperous they might seem.

While I think 68/73 has use as a baseline, I strong suspect that the current success or failure of a large number of older cities is rooted far back in history, in their development patterns, culture, and social structures. People like to ascribe say the success to Chicago over 150 years as a matter of geography or some such, but I think in reality Chicago (and Atlanta, New York, etc) are what they are because of their unique character as cities, good leadership and decision making at the right time, and a comparative lack of civic dysfunction. I think like many of our personal failings, the roots of civic failure often extend back to urban childhood.

I'm sure there has been research on this topic. I know you are very familiar with Saxenian's work contrasting Silicon Valley with Boston, for example. I think it would make a fascinating area to study in depth.

The Urbanophile has noted that a key characteristic of civic progress and success in Indianapolis might be the degree to which "outsiders" assume leading positions in the community.

This is clearly a distinction between Boston and Silicon Valley. I think if "outsider upward mobility" and "assimilation of independent/outside thinking" could be quantified, growing cities would have higher coefficients of both, and shrinking ones, lower.

For instance: upward mobility in the Big Three was dependent on one's corporate politicking skills and on the ability to buy in to the cultural groupthink. (In the words of an advice columnist, "do not ask me how I know this".) This permeated Detroit's upper-echelon culture.

Look also at the built form of our cities that tried to re-make themselves in the post-riot era. Detroit's Renaissance Center was relatively new when I made my first visit there in the early 80's. It was built like an urban fortress, with what seemed like a 20-foot-tall urban battlement (concrete wall) around its base. This tells you something about the thinking of the civic leaders of the time: KEEP OUT!

So I guess I don't completely agree with Jim Russell. Detroit's woes ARE steeped in its long-time monoculture: Automanufacture uber alles.

(But I am quick to add, I mean the internal culture of the auto industry. I don't mean the cultural effects of the automobile. Those are separate and far more widespread. EVERY major city east of the Mississippi has suffered from the rise of the "car culture".)

Cities discussed in this post, Detroit, Buffalo, and Pittsburgh - cities that grew out of manufacturing - seem to have fallen when they failed to adapt to a post manufacturing environment. A lot of good theories have been discussed. I know Pitt has done a nice job building a life-science economy around their university hospital, however, manufacturing is a truly powerful engine that boosts other regional industries.

The two new industries that are on the horizon (if not here already) are energy efficiency and smart transportation. I wonder if this is the opportunity of the Great Lakes region to get that needed boost building this infrastructure. Examples include building wind turbines, components for rail (tracks, cars), and computer systems to control traffic better, etc. It may be TOO late for this move. What is the next BIG industry?

While I think 68/73 has use as a baseline, I strong suspect that the current success or failure of a large number of older cities is rooted far back in history, in their development patterns, culture, and social structures.

Perhaps this isn't the time to discuss theories of urban geography. I tend to look at variance as a function of political economy, more or less a structuralist approach. Unique urban identity and history are nothing more than statistical noise.

In other words, I don't think Chicago's reinvention had much to do with its history prior to the last period of global expansion. Similarly, Detroit's demise is the result of how the region dealt with exogenous shocks of the 1970s.

I write the above in order to clarify my position and approach to the mystery, not to critique the ideas of others.

Probably something you need a graduate degree for. The current growth industries are life sciences, biotech, software, alternative energy, and semiconductors.

That's why Detroit is so badly off. It can't make computer systems for traffic control - Silicon Valley, New York, and Boston are far better at that. It can make rails and cars, but these are small industries - the largest manufacturer of rolling stock in the world, Bombardier, is between one twentieth and one tenth the size of Toyota. Alternative energy is already controlled by the more progressive oil companies: Shell and BP are the top two manufacturers of photovoltaic cells in the world.

Alon: even today, the auto industry dwarfs all those you cite with the exception of energy. Would softly suggest that more graduate degree's bestowed to people to advance the auto industry would be a much better focus than all those graduate degrees bestowed on the current 'masters of the universe' that turned Wall Street into a gigantic casino. ('softly suggest' because all those MBA's sure did not help the financial services sector as it is now known)

"Unique urban identity and history are nothing more than statistical noise.

In other words, I don't think Chicago's reinvention had much to do with its history prior to the last period of global expansion. Similarly, Detroit's demise is the result of how the region dealt with exogenous shocks of the 1970s."

Ah, but "how the region dealt" with its challenges is a direct result of its culture that developed over decades, pre-1973.

"Things will get back to normal soon" is not a useful adaptation tool. "The city that works" is.

Detroit's "head in the sand" thinking existed long before anyone had heard of OPEC or Honda, and it persisted in spite of the need to adapt to a changing world: the root of the precipitous decline.

Anon: who the hell brought up Wall Street and MBAs? None of the industries I mentioned has anything to do with finance. They're high-technology industries which are growing quickly in the same way auto was small but grew quickly a hundred years ago. Even then, there were cities that believed focusing just on textiles was enough, especially in Northern England; by the 1950s, the region looked worse than Flint as depicted on Roger and Me. Monty Python's depiction of Yorkshire as the third world wasn't that exaggerated.

Anonymous, in your attempt to make a snarky remark to Alon, you revealed your own ignorance and pettiness. He did NOT state or imply that one needs a graduate degree to work in the textile industry. He was stating that many of the rapidly growing industries today, often DO require graduate degrees, which is true. As for his mentioning the textile industry. You missed his point entirely. He used the example of New England textile manufacturing towns to illustrate that it is economic folly for any region to focus solely on anyone main industry simply because it is the big industry of that time period. As Alon points out, what is the dominant industry today, may not be the dominant industry tomorrow, and any region would do well to balance industry consolidation with encouraging innovation and supporting emerging industries' growth. Either you misread his remarks or you purposely tried to twist his meaning in order to make your silly and snarky remark. Either way, it does not reflect well on you.

One last comment on Detroit industry. Once GM, Chrysler, and Ford are able to reorganize and the economy improves, does anyone think it would be wise for them to diversify into manufacturing goods in addition to cars? Use GE as an example in that they make everything from light bulbs to CT scanners to diesel engine trains to owning NBC Universal. I think this could help a company like GM whether future changes in the auto industry.

I say this with caution because I would hate to see already struggling companies move into charted waters; but wonder if in a number of years why GM or Ford couldn't put themselves in a position to manufacture components for HS rail, wind turbines, etc. Certainly this could improve the Detroit economic base.

JG, all of the big three did have some diversified manufacturing assets. Their record isn't good.

GM built diesel-electric locomotives in its Electro-Motive Division, and once owned Hughes Electronics (a defense contractor), EDS (they bought it from Ross Perot), and GMAC (consumer lending). Ford once owned Philco-Ford, a consumer electronics brand, and built the renowned Ford Trimotor airplane. I think Chrysler had an aerospace division as well, but I'm a bit fuzzy there. The old American Motors AM General division built tanks, trucks, and Hummers for the military (can't remember if it was spun off before Chrysler bought AMC or after).

GE is one of the FEW success stories in US industrial diversification, mainly because they periodically turn over their portfolio of businesses. They bought RCA, one of the failed examples of multi-companies in the 1970s (records, NBC, tv's, semiconductors, space/satellites), kept NBC and satellites and got rid of the rest. They sold their small-appliance business to Black & Decker, plastics division to the Saudis, etc.

Some on this board make rather sweeping statements that are not based on reality.

The auto industry is the 2nd largest industry in the world and is likely to remain so until you are able to 'beam yourself' to another location.

In case you forget, much of Indy and its environs owe much to the auto industry...at one point Indy actually rivaled Detroit in the manufacture of automobiles. Am not quite sure how/why that mantle eventually passed to Detroit but it did. The Indy 500 is also a symbol of the importance the auto industry played in Indy's history.

Might suggest that Indy figure out how to capitalize on its historic ties to the auto industry instead of focusing on what some consider future growth (with high risk and lots of competition) where its resources/location etc may not be an advantage.

Thundermutt - Thanks for the info regarding automaker attempts to diversify their industry. It's too bad they were not successful - and I suspect this would be a bad time to attempt anything of the such. But maybe not, too complicated for me to comment further.

Anon 2:29 - Good idea for INDY. I think there is already exist a large number of companies associated with racing and race tech around the area (not an area I know too much about.) But I do like the idea of INDY becoming the auto technology capital of the U.S. Being between Detroit and Ken/Tenn (with foreign auto manufacturing) could make this doable. For example attracting auto tech start-ups (e.g. high performance hybrid engine design, other components for racing or merely personal cars) to the area.

People need to get around, but they don't need $15,000 cars for it. The problems of the auto industry, especially the first world auto industry, are manifold, and probably irreversible.

1. First world markets are nearing saturation. Because today's cars are better than yesterday's, they last longer - in the US, it's twice as long as 20 years ago. This means fewer sales per year.

2. Automation means that the auto industry is less labor-intensive. The cost savings are passed along to the consumer, who enjoys real declines in car prices.

3. Conversely, rising oil prices are making it less economic to own a car. The current oil glut is temporary, and GM is expecting $130/barrel oil and $4/gallon gas to be back by 2013.

4. There are smaller returns to scale than there used to be: unlike in the 1950s, there's no inherent reason to keep all factories in one place. This makes it easier to offshore. Why pay $70/hour to workers in Detroit or even $45/hour in Huntsville, when you can pay $8/hour in Guangzhou?

5. Third world markets are growing too slowly. To the extent that they're growing, global warming concerns are causing India and China to spend their resources on building mass transit, not highways. Cities in those countries are trying to look more like Hong Kong and Singapore than like Los Angeles and Houston.

I think the causes of Detroit's decline can be boiled down to 2 main causes:

1) Single industry dominance of the auto industry. As someone noted, when the auto industry was king, it helped smooth over a lot of problems that afflicted Detroit. Now that it's near collapse, there's nothing left to prop up Detroit.

2) 50 years of suburban sprawl. Detroit's been sprawling outwards for years, matched by the decline in the city's population. The metro area doesn't lack for wealth, it's just been disbursed across multiple counties.

I think cause #1 is far more important. Cause #2 exists also in Atlanta, whose metro area has an abnormally low density even by US standards, as well as less concentration of density in its core. Atlanta proper suffered similar population decline in the 1970s to the Northeastern cities, and took until 2007 to recover to its 1970 population peak. On top of that, Georgia counties are very small, leading to fractionalized governments, with the same racial divides between the black inner city and its white suburbs as in Detroit.

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